BNAD 301 Exam 3 - Ch.13

Members of Congress are able to influence monetary policy, albeit indirectly, through their ability to

Propose legislation that would force the Fed to submit budget requests to Congress, as must other government agencies

The Federal Reserve Banks are _____ institutions since they are owned by the _______.

Quasi-public; private commercial banks in the district where the Reserve Bank is located

Although neither _______ nor the ______ are officially set by the Federal Open Market Committee, decisions concerning these policy tools are effectively made by the committee

Reserve requirements; discount rate

Which of the following functions is not performed by any of the twelve regional Federal Reserve Banks?

Setting interest rates payable on time deposits

Which of the following is a duty of the Board of Governors of the Federal Reserve System?

Setting margin requirements, the fraction of the purchase price of the securities that has to be paid for with cash

The Federal Open Market Committee consists of the

Seven members of the Board of Governors and five presidents of the regional Fed banks

Member of commercial banks have purchased stock in their district Fed banks; the dividend paid by that stock it limited by law to ____ percent annually

Six

Each Federal Reserve bank has nine directors, Of these _____ are appointed by the member bank and ______ are appointed by the Board of Governors

Six; three

The Governing Council usually meet ______ times a year

Twelve

The First Bank of the United States

Was disbanded in 1811 when its charter was not renewed

The theory of bureaucratic behavior when applied to the Fed helps to explain why the Fed

Was so secretive about the conduct of future monetary policy

Of all commercial banks, about ______ percent belong to the Federal Reserve System

38

The nine directors of the Federal Reserve Banks are split into three categories; ______ are professional bankers, _______ are leaders from industry, and ______ are to represent the public interest and are not allowed to be officers, employees, or stockholders of banks

3; 3; 3

The three largest Federal Reserve banks (New York, Chicago, and San Francisco) combined hold more than ______ percent of the assets of the Federal Reserve System

50

There are ______ members of the Board of Governors of the Federal Reserve System

7

The financial panic of 1907 resulted in such widespread bank failures and substantial losses to depositors that the American public finally became convinced that

A central bank was needed to prevent future panics

Banks subject to reserve requirements set by the Federal Reserve System include

All banks whether or not they are members of the Federal Reserve System

The strongest argument for an independent Federal Reserve rests on the view that subjecting the Fed to more political pressures would impart

An inflationary bias to monetary policy

Members of the Board of Governors are

Appointed by the president of the United States and confirmed by the Senate

The research document given to the Federal Open Market Committee that contains information on the state of the economy in each Federal Reserve district is called the

Beige book

Under the European System of Central Banks, the Executive Board is similar in structure to the _____

Board of Governors

An important function of the regional Federal Reserve Banks is

Clearing checks

The Fed's support of the Depository Institutions Deregulation and Monetary Control Act of 1980 stemmed in part from its

Concern over declining Fed membership

The case for Federal Reserve independence does not include the idea that

Policy is always performed better by an elite group such as the Fed

What makes the Federal Reserve so unique compared to other central banks around the world is its

Decentralized structure

Subject to the approval of the Board of Governors, the decision of choosing the president of a district Federal Reserve Bank is made by

District bank directors who are not professional bankers

Members of the Executive Board of the European System of Central Banks are appointed to ______ year, nonrenewable terms

Eight

The Federal Open Market Committee usually meets _____ times a year

Eight

The Depository Institutions Deregulation and Monetary Control Act of 1980

Established uniform reserve requirements for all banks

The political business cycle refers to the phenomenon that just before elections, politicians enact _______ policies. After the elections, the bad effects of these policies (for example, _______) have to be counteracted with ______ policies.

Expansionary; a higher inflation rate; contractionary

The Federal Reserve entity that makes decisions regarding the conduct of open market operations is the

Federal Open Market Committee

Under the European System of Central Banks, the Governing Council is similar in the structure to the ______ of the Federal Reserve System

Federal Open Market Committee

Under the European System of Central Banks, the National Central Banks have the same role as the ______ of the Federal Reserve System

Federal Reserve Banks

Each Fed bank president attends FOMC meetings; although only _____ Fed bank presidents vote on policy, all ______ provide input

Five; twelve

The Chairman of the Board of Governors is closed from among the seven governors and serves a ____ term

Four - year

The Second Bank of the United States

Had its charter renewal vetoed in 1832

The Federal Open Market Committee's "balance of risks" is an assessment of whether, in the future its primary concern will be

Higher inflation or a weaker economy

The theory of bureaucratic behavior suggests that the objective of a bureaucracy is to maximize

Its own welfare

All _____ are required to be members of the Fed

Nationally chartered banks

The Federal Reserve Bank of ______ plays a special role in the Federal Reserve System because it houses the open market desk

New York

The president from which Federal Reserve Bank always has a vote in the Federal Open Market Committee

New York

Each governor on the Board of Governors can serve

One full nonrenewable fourteen year term plus part of another term

While the discount rate is "established" by the regions Federal Reserve Banks, in truth, the rate is determined by

The Board of Governors

Which of the following is NOT an entity of the Federal Reserve System?

The Comptroller of the Currency

Which of the following is an entity of the Federal Reserve System?

The FOMC

The public's fear of centralized power and distrust of moneyed interests let to the demise of the first two experiments in central banking, otherwise known as

The First Bank of the United States and the Second Bank of the United States

Goal independence is the ability of ______ to set monetary policy ______

The central bank; goals

Instrument independence is the ability of _____ to set monetary policy ______

The central bank; instruments

Critics of the current system of Fed independence content that

The current system is undemocratic

Prior to 1980, member banks left the Federal Reserve System due to

The high cost of required reserves

Recent research indicates that inflation performance (low inflation) has been found to be best in countries with

The most independent central banks

The majority of members of the Federal Open Market Committee are

The seven Federal Reserve governors